Executive pay outstripped by UK average increase

Executives’ pay has been outstripped by UK average pay increases for the first time in a decade, according to new research.

Last year’s national average earnings increase (2.5%), outstripped FTSE 100 (1%) and FTSE 250 (0%) base pay increases for the first time in a decade, according to a PricewaterhouseCoopers (PwC) report Executive Compensation – Review of the Year 2009.

Around one in six FTSE 100 executive directors did not receive a bonus in 2009, with median bonus payments falling 20%. †

Shareholder opposition to remuneration proposals grew and 20% of FTSE 100 firms had more than one in five of their shareholders withhold support for the remuneration report, up from 3% in 2008.

PwC’s research also found that median maximum bonus potential for CEOs remained stable at 150% of salary in the FTSE 100, equivalent to around £1.2m, and 100% in the FTSE 250, which would equate to around £425,000 if paid out in full.

Tom Gosling, reward partner at PwC, said: “Remuneration committees must balance the need to motivate executives in the face of a challenging business environment, reduced bonuses and increased taxation against shareholders’ perceptions that the link between pay and performance is not strong enough, and that one year of pay restraint is not sufficient given the severity of the downturn and the impact on profits.

He added:“Shareholder activism on pay increased significantly last year and with the next AGM season taking place during or in the run up to an election, against a backdrop of continued economic uncertainty, scrutiny on executive pay arrangements will not diminish this year. The appropriateness of performance measures and payments in respect of annual bonus and long-term incentive plans will be subject to great debate.”